The governor and Legislature should establish the legal authority for state and local governments to freeze pension
benefits for current workers, the Little Hoover Commission concluded Thursday in a report sure to ignite fireworks.

“State and local governments cannot solve this problem without addressing the mounting pension obligations of current employees,” said Daniel W. Hancock, chairman of the commission, in a prepared statement.

The good-government watchdog’s report on public pensions was long in the making. Like the Legislative Analyst, it recommends a “hybrid” pension model that combines a lower guaranteed-payout formula with an employer-matched (and risk-managed) “defined-contribution plan,” like a 401K.

Unlike the Legislative Analyst, it recommends stripping down the pensions of current employees, not just future employees.

“The Commission acknowledges the significant challenges to modifying pension benefits for current workers,” it said, with considerable understatement. “Nonetheless, the Governor and Legislature should set uniform standards for the 85 defined-benefit pension plans in California, including:

A cap in the $80,000 – $90,000 range of the maximum salary that could be used to calculate pension benefits.

Eligibility ages for pension benefits that do not encourage early retirement.

A requirement that employees and employers share the normal costs of funding their pension plans.

Clear definitions of final compensation to prevent “spiking.”

A prohibition against contribution “holidays” when employers do not pay into the funds.

A ban on retroactive pension increases.

Steps to improve accountability and transparency.”

Payments to current retirees would not be affected, it said.

State employee associations are ripping the report to shreds.

“The Little Hoover Commission has truly missed the mark in its efforts to study potential reforms to California’s 85 public employee retirement systems,” says a retort by Californians for Health Care and Retirement Security, a coalition of public employee union types. “Rather than presenting a reasoned and constructive analysis, the Commission attempts to wipe away more than 50 years of legal and financial precedent by joining the chorus of doomsayers who seek to undermine retirement security for millions of Californians.”

When average pension payments for public employees are in the range of $24,000 per year it is unconscionable to call for cuts and rollbacks of those payments, it said.

“For a supposedly non-partisan commission this report enters the policy discussion on the side of the Governor of Wisconsin, seeking to cut the benefits of teachers, firefighters and other public employees who are already working to find ways to ease the financial pressures on our governments,” said Dave Low, chairman of Californians for Health Care and Retirement Security. “While there are real challenges facing our state and local governments the rhetoric of this report seems designed to inflame fear rather than to generate reasoned solutions.”

“Across California public employees are doing their part to help meet the pension challenges caused by the market collapse,” Low said “Public employees did not cause the economic crisis, but like all other Americans they have paid a dear price for the excesses and abuses of Wall Street.”

We’ll be giving the report a more thorough read. We look forward to some enlightening discussion from our readers. BEHAVE, people.

Sforza birthed the OC Watchdog column aiming to keep a critical (but good-humored) eye on governments and nonprofits, large and small. It won first place for public service reporting from the California Newspaper Publishers Association in 2010. Sforza contributed to the OCR's Pulitzer Prize-winning investigation of fertility fraud at UC Irvine, covered what was then the largest municipal bankruptcy in America‘s history, and is the author of "The Strangest Song," the first book to tell the story of a genetic condition called Williams syndrome and the extraordinary musicality of many of the people who have it. She earned her M.F.A. from UCLA's School of Theater, Film and Television, and enjoys making documentaries, including the OCR's first: "The Boy Monk," a story that was also told as a series in print. Watchdogs need help: Point us to documents that can help tell stories that need to be told, and we'll do the rest.

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